Oil Price Analysis: Why Diesel Margin Could Send WTI Back to $90
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Key Points:
- $104.62 a barrel. That's the New York Harbor diesel crack on the EIA's spot series for 18 August. I ranked it against all 5,060 daily readings back to 2006: 21st highest, and every reading above it belongs to 2022.
- Crude rose 12.6% between 5 and 18 August. Diesel rose 19.1%, so the crack widened by a quarter while oil rallied. The refined product is setting the price of the barrel.
- One barrel is plentiful, one is not: the week ending 14 August has crude inventories at 428.8 million barrels, exactly on their five year average, and distillate at 105.6 million, 12.8% below it.
Crude has fallen hard while I wrote this. WTI settled near $82.40 on 25 August and traded near $80.50 the next morning, down over 5% in two sessions, as talk of an interim shipping corridor through Hormuz gathered pace. My invalidation level sits at $80.91, so the market is testing this piece in real time. Below, I’ll set out why the bid under crude now lives at the refinery gate, and what breaks it.